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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The “Income before income tax expense” line item in the consolidated statements of operations consisted of:
(Dollars in millions)202420232022
Domestic$(13.9)$9.1 $58.4 
Foreign48.2 67.2 82.0 
Total$34.3 $76.3 $140.4 
The “Income tax expense” line item in the consolidated statements of operations consisted of:
(Dollars in millions)CurrentDeferredTotal
2024
Domestic$2.7 $(6.9)$(4.2)
Foreign22.8 (10.4)12.4 
Total$25.5 $(17.3)$8.2 
2023
Domestic$0.4 $(0.6)$(0.2)
Foreign22.9 (3.0)19.9 
Total$23.3 $(3.6)$19.7 
2022
Domestic$26.8 $(18.8)$8.0 
Foreign17.6 (1.8)15.8 
Total$44.4 $(20.6)$23.8 
Deferred tax assets and liabilities as of December 31, 2024 and 2023, were comprised of the following:
(Dollars in millions)20242023
Deferred tax assets
Accrued employee benefits and compensation$8.7 $7.7 
Net operating loss carryforwards16.4 11.8 
Tax credit carryforwards7.0 6.7 
Reserves and accruals8.4 5.7 
Operating leases2.2 3.6 
Capitalized research and development30.4 25.6 
Other14.6 6.9 
Total deferred tax assets87.7 68.0 
Less deferred tax asset valuation allowance(12.5)(11.4)
Total deferred tax assets, net of valuation allowance75.2 56.6 
Deferred tax liabilities
Depreciation and amortization24.8 17.7 
Postretirement benefit obligations1.0 0.7 
Unremitted earnings1.3 1.5 
Operating leases2.6 4.1 
Other2.0 5.8 
Total deferred tax liabilities31.7 29.8 
Net deferred tax asset (liability)$43.5 $26.8 
As of December 31, 2024, we had state net operating loss carryforwards totaling $13.2 million in various state taxing jurisdictions, which expire between 2025 and 2044, and approximately $3.8 million of state research credit carryforwards, which will expire between 2025 and 2041. We also had a $1.7 million federal R&D credit carryforward that will expire in 2043. We believe that it is more likely than not that the benefit from certain of the state net operating losses and state R&D credits carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $2.1 million relating to these carryforwards. We currently have approximately $2.3 million of foreign tax credits that begin to expire in 2028.
As of December 31, 2024, we had foreign net operating loss carryforwards totaling $60.8 million. Germany losses totaled $12.2 million and can be carried forward indefinitely. Luxembourg losses totaled $29.3 million, of which $4.0 million will expire between 2034 and 2040, and the rest will be carried forward indefinitely. We believe it is more likely than not that these losses will expire unused, and have provided a valuation allowance for all Luxembourg net operating loss carryforwards. China losses totaled $14.8 million, which expire between 2025 and 2029. We believe it is more likely than not that some of these losses will expire unused, and have provided a valuation allowance for a portion of China net operating loss carryforwards. South Korea losses totaled $4.5 million, which expire between 2036 and 2038.
We had a valuation allowance of $12.5 million as of December 31, 2024 and $11.4 million as of December 31, 2023, against certain deferred tax assets, primarily carryforwards expected to expire unused and deferred tax assets that are capital in nature. No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions. Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable.
Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income taxes. The reasons for this difference were as follows:
(Dollars in millions)202420232022
Tax expense at Federal statutory income tax rate$7.2 $16.0 $29.5 
Impact of foreign operations2.8 4.0 1.5 
Foreign source income, net of tax credits(2.7)(2.3)(6.5)
State tax, net of federal impact0.9 (0.5)6.9 
Deferred tax adjustment— 1.2 — 
Unrecognized tax benefits(1.5)(0.2)1.9 
Equity compensation1.7 0.3 (3.0)
General business credits(1.6)(2.4)(0.8)
Distribution related foreign taxes1.4 1.1 1.5 
Executive compensation limitation0.9 0.9 2.9 
Valuation allowance change(0.8)0.7 (6.9)
JV separation non-taxable(1.5)— — 
Taxable currency fluctuations1.0 — — 
Other0.4 0.9 (3.2)
Income tax expense$8.2 $19.7 $23.8 
Our effective income tax rate for 2024 was 23.9% compared to 25.8% for 2023. The 2024 rate decrease was primarily due to the (i) release of valuation allowance against certain NOLs, (ii) JV Separation which did not have a corresponding tax gain and (iii) favorable releases of uncertain tax positions, offset by (iv) increased non-deductible equity compensation.
We did not make any changes in 2024 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain Chinese subsidiaries, we continue to assert that historical foreign earnings are indefinitely reinvested. As of December 31, 2024 and 2023, we had recorded a deferred tax liability of $1.3 million and $1.5 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested. The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we estimate that, if these undistributed earnings are distributed, they may give rise to an estimated $1.9 million of additional tax liabilities. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2024 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change. Distributions out of current and future earnings are permissible to fund discretionary activities such as business acquisitions. However, when distributions are made, this could result in a higher effective tax rate.
Unrecognized tax benefits, excluding potential interest and penalties, for the years ended December 31, 2024 and 2023, were as follows:
(Dollars in millions)202420232022
Beginning balance as of January 1$8.5 $8.9 $6.6 
Gross increases - current period tax positions0.2 1.1 3.4 
Gross increases - tax positions in prior periods— — 0.2 
Gross decreases - tax positions in prior periods— (0.5)(0.2)
Foreign currency exchange— 0.1 (0.1)
Settlements and remeasurements(1.8)0.1 (1.0)
Lapse of statute of limitations(0.1)(1.2)— 
Ending balance as of December 31$6.8 $8.5 $8.9 
Included in the balance of unrecognized tax benefits as of December 31, 2024 were $5.2 million of tax benefits that, if recognized, would impact the effective tax rate.
We recognized interest accrued related to unrecognized tax benefit as income tax expense. Related to the unrecognized tax benefits noted above, as of December 31, 2024 and 2023, we had accrued potential interest and penalties of approximately $1.3 million and $1.4 million, respectively.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2020 through 2024 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state, local and foreign examinations by tax authorities for the years before 2020.